The brand new car smell! So many people love it. Many people live for it. Purchasing a new car every 7 years or less. I get it! Its exciting and after all, its new! But its also a huge detriment to anyone pursuing financial stability and freedom. Why? It is a liability (not an asset) that depreciates terribly the instant you purchase it. You don’t even have to drive it off the lot before the depreciation kicks in, making your new car worth significantly less than it was worth ten minutes before you financed it! The reason I call it a liability is because it will cost you money to own that car, whether it be interest paid, repairs, or routine maintenance. Assets on the other hand should make you money, or at worst, don’t cost you anything to hold onto. So what should one do? Its simple. Take advantage of others bad choices of course! I know this sounds bad, but hear me out!
In typical fashion of the consumer mindset, the second most people realize they are making enough money to finance a new car or they realize that the raise they’re about to get will allow them to finance the car of their dreams, they run out to the nearest dealership. They sign on the dotted line and drive that depreciating liability off the lot. They hold onto it for awhile and then realize that the car of their dreams has now been replaced by a NEWER car that is now the car of their dreams. Their current car becomes the nagging ex they just can seem to get rid of. So they are willing to do whatever it takes to get rid of it so that they can go get that NEWER more expensive car to impress everyone around them that is also of the consumer mindset, even if it means selling the car for a loss!
The benefit of this all too common situation is that you can now purchase a newer car with low miles and often times a transferrable warranty for anywhere between 1/2 to 3/4 the price they paid. And if you’ve put yourself in a great financial position this far, you will have saved up enough to make this purchase outright with all cash (which I would advise). However, even if you must finance, you can often get a very low interest loan for a short term. These terms will far surpass those offered by a car dealership more often than not. And your “new” car will be paid off in no time. So essentially, you are taking advantage of the poor decision of others to purchase a nearly brand new car. Not to mention, these cars are often being sold by a private party. Which means we get to use our ability to negotiate to make for an even more affordable purchase on our part!
Most Americans, including many that I know will spend anywhere from $600-1,000 per month on depreciating liabilities we call vehicles! And while it is important to have a reliable vehicle that you can depend on, it is wise to obtain one that is also affordable. If we look at the numbers mentioned above on an annual basis, that adds up to anywhere for $7,200-$12,000 dollars per years. Now imagine saving that money and investing it is an appreciating asset that provides you with cash flow of a couple hundred per month. In 2 years times, you could have saved an amount that could provide you with a down payment on a cash flowing rental property or a sizable investment into a mutual stock fund that is returning you money on an annual basis!
So the next time you see someone roll by in the car of your dreams, just keep in mind the end goal. Financial stability and freedom. I don’t know about you, but a new car is not worth time with my family and friends that is obtained through financial freedom. And if were being honest, no one cares what car you’re driving around anyway! So make the smart choice and save yourself thousands that you can invest to make you money!
Journey to Financial Freedom 